October 23, 2012

Communicating with Clients Through Invoices

Far too many lawyers do not know how to prepare time charges. They fail to appreciate that an invoice is a form of communication with a client. The contents of an invoice should be prepared with the same thought and effort as a letter to be sent to a client.

A time charge that merely states “legal research,” for example, is a missed opportunity to communicate with the client, and repeated time charges for “legal research” or “review and revision” of a document are likely to create misunderstandings by, and resentment of, a client.

When I review inadequate time entries in a draft invoice, I ask the responsible lawyers how they would feel if they received such an invoice. Would they understand the invoice and be willing to pay for the legal services? More pointedly, I ask them exactly what “legal research” was done and why it took the stated number of hours. They prove my point when they cannot adequately describe the legal research or explain the hours needed to do the work.

Most clients do not understand the work lawyers do. They do not understand that even when a lawyer knows a particular area of the law, a lawyer may still need to review the law and research the legal issues. They do not understand that a lawyer may need to review and revise contracts, briefs and other documents so that they clearly, concisely and persuasively express a client’s position or protect a client’s rights and interests. Clients do not understand how much time and effort it takes to do legal work. The invoice is the opportunity to help a client understand.

The more descriptive the time charges on an invoice, the more likely a client will understand the work being done, the more likely a client will appreciate the effort being made on his behalf, and the more likely payment will be made. A lengthy description is not necessary. As shown below, a concise description will do the job.

  1. Telephone Conferences. The description “telephone conference with client” does not communicate anything worthwhile to a client. A client cannot be expected to recall one of many telephone conferences with his attorney. If the client is a business entity, the time entry does not inform the client who was involved in the telephone conference. A client will not be aware of telephone conferences between his lawyer and third parties. This type of time entry should read as follows: Telephone conference with John Smith on scheduling a meeting to prepare for his deposition.

  2. Correspondence. A description such as “review of letter,” “preparation of letter” or “email exchange with client” does not communicate anything to a client. These time entries should be more descriptive, as follows: Review of letter from attorney James Jones on proposed revisions to stock purchase agreement; or email exchange with client on proposed indemnification provisions in stock purchase agreement.

  3. Research. Time entries merely stating “research” and “continue research” are inadequate. If you were a client, how would you like to receive an invoice with such time entries without any explanation of the issues being researched by your lawyer? Research takes time. As a result, the amount of these time charges may be significant. A client being billed for research is entitled to know what issues are being researched by his attorney. These time entries need to describe the legal issues being researched, without belaboring the point. For example: Research case law to determine applicability of statute of frauds defense and laches defense; or continue research on statute of frauds issue.

  4. Preparation and Revision of Documents. These time entries are often significant, whether the lawyer is preparing a brief, memo or contract. The client is entitled to more than “preparation of brief” when receiving an invoice for several thousand dollars. These time entries need to explain what is being prepared or revised by the lawyer. Here are some examples: Preparation of draft of Statement of Facts, Procedural History and Point I of brief in support of motion for summary judgment; Review and revision of draft Statement of Facts; Preparation of indemnification provisions for stock purchase agreement; and Revision of indemnification provisions based on client’s comments.

  5. Attend to File/Review of File. Clients do not understand the need for lawyers to review and organize their files. Therefore, these time entries need to be descriptive: Review of file to determine deadlines for discovery from plaintiff.

  6. Dictation. It is more professional to use a description other than “dictation.” For example: Preparation of letter to attorney Jane Smith on deficient answers to plaintiff’s interrogatories.

  7. Appearances/Meetings Out of Office. These time entries should state what the lawyer was doing and where since a portion of the time charge will include travel time. For example: Appearance before Judge Smith at the Morris County Court House for oral argument in support of plaintiff’s motion for summary judgment; or Meeting with CEO at client’s place of business to discuss dispute with supplier.

  8. Conferences. Conferences among attorneys in the same firm need descriptive explanation so that clients understand they are not being charged for social conferences between attorneys. As an example: Conference with employment lawyer John Smith to discuss permissible scope of non-competition provision in asset purchase agreement under law.

  9. Review of Documents. If a lawyer reviews a letter, pleading, contract, etc., the time entry should be self-explanatory. However, if the lawyer is reviewing a document for a specific purpose, that purpose should be explained. For example: Review of deposition transcript of John Smith to select portions of testimony for inclusion in brief supporting motion for summary judgment.

  10. Photocopying. Clients should not be charged for a paralegal’s time making photocopies since that is a clerical task. However, a client can be charged for a paralegal’s time when the paralegal is doing more than simply making photocopies. The time entry must describe the services: Review, reproduce and assemble documents to be furnished to John Smith at the request of attorney James Jones.

Clients read invoices. An invoice is a lawyer’s opportunity to communicate with a client. It is an opportunity to explain the work being performed on behalf of a client. A descriptive invoice will help a client understand a lawyer’s work and likely ensure payment by a client.